Thursday, July 26, 2012

Shares of Facebook
Inc(NASDAQ:FB) fell near to record lows after its main game provider Zynga
Inc(NASDAQ:ZNGA) reported a loss in its second quarter results on Wednesday and
cut its outlook for 2012, blaming the dwindling interest by the social
network's players for its poor performance.

Zynga's stock crashed by 35 percent and touched a record low
of $3 after the company pegged its earnings in 2012 between 4 and 9 cents a
share, down from the 23 to 29 cents previously forecast.

The maker of `Farmville' reported a net loss of $22.8
million, or 3 cents a share, compared with a profit of $1.4 million a year ago.

Its adjusted profit, which excluded certain items, was 1
cent a share, much below the 5 cents expected by analysts. Revenues for the
quarter were $332.4 million, compared the $344.12 million polled by analysts.

Facebook, which will announce its results on Thursday, is
expected to be hit by Zynga's dismal performance, whose flagship Farmville game
contributes about 15 percent to the Mark Zuckerberg-owned company. Shares in
Facebook fell 7% to $27 in opening market activity.

The top-rated social network has been struggling to regain
investor confidence after a hyped-up market debut in May failed to live up to
expectations and its shares have fallen nearly 30 percent from its inaugural
price.

The declining popularity of Farmville, which accounted for
slightly less than third of Zynga's revenues in the quarter, is being seen as
the villain of the piece with the number of players on Facebook falling to 20
million users from 80 million in March, the social network's data showed.

Despite a rise in the game maker's daily active users by 23
percent to 72 million in the June quarter, its average daily bookings per user
fell 10 percent to 4.6 cents. Zynga executives admitted that a new game 'Draw
Something' acquired by the company for $183 million also failed to deliver
according to expectations, though it boosted its base of monthly players.

Analysts said that though the company had introduced several
new games, it was not reflected in its operating earnings.

CEO Mark Pincus, who took control of the company on
Wednesday, said that changes made to Facebook's site were making it difficult
for players find Zynga's existing games.

Zynga went public in December 2011 on the back of a renewed
boom in internet stocks in the U.S., issuing its shares at $10 each, but has
seen a 70 percent erosion in prices so far. Shares of ZNGA are down 38.36% to
record low of $3.13 in pre-open activity.